…Recommends cash transfers, transport subsidies for vulnerable Nigerians —
The International Monetary Fund, IMF, has warned Nigeria against restoring a broad petrol subsidy, recommending targeted financial assistance and other relief measures to protect vulnerable households from rising energy costs.
Rodrigo Valdés, director of the IMF’s Fiscal Affairs Department, gave the warning during a press briefing on the fund’s Fiscal Monitor at the 2026 annual meetings of the IMF and World Bank in Bangkok, Thailand, on Wednesday.
His comments followed a question on how the IMF could recommend allowing energy prices to reflect supply constraints when higher petrol prices in Nigeria could increase transport fares, fuel inflation and deepen poverty, particularly amid calls for the government to restore the subsidy ahead of an election year.
“Protecting people is not the same as protecting the price of fuels,” Mr Valdés said.
He explained that subsidies and other measures preventing domestic energy prices from adjusting fully to global supply shocks had cost countries between one and 1.5 per cent of their gross domestic product in 2026.
According to him, the policy is not only expensive but can also be regressive because higher-income households, which generally consume more fuel, tend to receive a disproportionate share of the benefits.
“It’s first fiscally very costly, and second, if you look at the pattern of consumption, it’s easy to see that that subsidy is readily regressive in many places,” he said.
Mr Valdés urged governments to rely on social safety nets and household data to identify people who genuinely need assistance rather than subsidising fuel prices for everyone.
“There are better tools to deal with this,” he added.
IMF recommends transport subsidies, cash transfers
The IMF also recommended targeted interventions to cushion the effects of higher petrol prices on transportation and household budgets.
Also speaking, Davide Furceri, a division chief in the fund’s Fiscal Affairs Department, said governments could redirect some of the resources previously spent on blanket subsidies towards vulnerable consumers.
He suggested that governments could support public transport users by subsidising bus fares rather than reducing petrol prices for all consumers.
“For example, you mentioned transportation costs. Yeah, gasoline could go up, and perhaps bus fees may be subsidised in a way that is a much better policy at the end of the day than just a blanket subsidy for everybody,” Mr Furceri said.
Other options he identified included school feeding programmes, geographically targeted assistance and support for vulnerable farmers.
Mr Furceri acknowledged that some countries lacked comprehensive household databases and digital payment systems needed to identify beneficiaries and deliver assistance efficiently.
However, he said governments could adopt alternative arrangements in the short term while developing stronger systems for delivering targeted relief.
He stressed that interventions should be limited, targeted and temporary to prevent emergency support from becoming a permanent drain on public finances.
Mr Valdés also warned that blanket subsidies could worsen global energy pressures by preventing consumers from reducing demand when supplies were constrained.
“When you subsidise, you don’t allow, at the end of the day, demand to adjust,” he said.
“And reality is that we have less fuels in the world economy. That means that someone else has to adjust more, and the market produces a higher price for that.”
The IMF official said suppressing domestic fuel prices could therefore have consequences beyond individual countries, as sustained demand amid constrained global supplies could put further upward pressure on international prices.
IMF raises concerns over poverty, cash transfers
The IMF’s warning also reflects the challenge of protecting vulnerable Nigerians while maintaining the fiscal gains associated with the removal of petrol subsidies.
In its 2026 Article IV consultation report on Nigeria, the fund said reforms introduced since 2023 had improved macroeconomic stability and strengthened the country’s resilience to external shocks.
However, it noted that economic conditions remained difficult for many households.
The report estimated that poverty had reached 63 per cent under Nigeria’s national poverty line and that 27 million Nigerians faced food insecurity in the autumn of 2025.
It also noted that 9.2 million households had been enrolled in the cash transfer system developed with World Bank support, against a target of 15 million households.
The fund’s staff report raised concerns about the pace of implementation, noting that individual households had received at most three payments of N25,000 each since 2023.
The IMF urged the government to accelerate cash transfers and allocate resources within the budget to provide temporary, targeted assistance to households facing rising poverty and food insecurity.
It also called for improved public financial management, stronger fiscal reporting and greater transparency to ensure that savings from subsidy reforms translate into budgetary resources.
The fund’s position is that preserving fiscal stability should go hand in hand with measures to protect those most affected by rising living costs.